Tuesday 13 December 2011

The European Investment Bank (EIB)

Farmers who are looking to invest in new buildings, machinery, or equipment should be aware that there are currently funds available from the European Investment Bank (EIB) which are aimed at helping investment in small and medium sized enterprises (SMEs).

SMEs are defined as businesses which employ less than 250 staff and so this covers most farmers. The size of the loan can be anything from £25,500 up to about £11m and so this should cover most levels of borrowing.

The funds, which can be accessed via high street banks or organisations such as the Agricultural Mortgage Corporation (AMC) reduce the borrowing rate by about 0.8% for loans of between 2 and 10 years and 0.6% for loans between 11 and 25 years. These discounts are available throughout the lifetime of the loan which on a £100,000 loan over 10 years would save the borrower about £4000 which is not to be sneezed at.

However, it must be understood the funds cannot be used for all types of borrowing and care is needed to identify whether the proposed investment qualifies. For instance the purchase of land or the refinancing of existing debt, which are two common reasons for borrowing money, does not qualify.

The EIB is EU’s long-term lending institution which is owned and financed by the Member States. It was established way back in 1958 under the Treaty of Rome and is there to support the EU’s priority objectives and in this instance funds are available to support investment being made by SMEs.

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

The amount of money being made available by the EIB is limited and it is likely this fund will run out soon. Therefore any farmer who is contemplating making a capital investment which will involve borrowing money is urged to make contact with their local Carter Jonas AMC agent or the author of this blog, James Stephen who will be able to put you in touch with the appropriate member if staff.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

Saturday 10 December 2011

Not playing the blame game

Imagine a media interview in which a politician, in under eight minutes, managed to not only answer two interviewers’ questions but appeared to be without the yolk of partisanship in clearly setting out how a country could, step-by-step, find its way out of recession through central government policy.

The politician being interviewed came from a Euro-currency country but he bore no bitterness towards his more powerful northern European neighbours, nor grudges toward his southern Euro-counterparts. He was very much not in the blame game.

How refreshing but it’s probably no surprise to anyone who has done business in the politician’s country. It was Mark Rutte, the Minister-President of the Netherlands– equivalent to the UK’s Prime Minister.

He spoke clearly and openly about his country’s growth strategy which seemed remarkably similar to what many people in this region and other UK hotspots targeted for growth have been urging as the way forward.

Rutte’s strategy for the Netherlands is to focus on the innovation, creative and technology industries, aligning the universities with business and vice versa at the earliest possible opportunity.

The Dutch Minister-President was being interviewed in Manchester - another great university city with a science focus through UMIST, its university’s institute of science and technology – where his delegation had been visiting a number of SMEs in the creative and innovation industries, as well as sharing thoughts on transport.

Not by coincidence as these things play out, the previous week, forty business leaders from the Netherlands had been on a fact-finding mission to Cambridge and had met several of our academic, business and civic luminaries including Prof Alan Barrell, Dr Hermann Hauser and the Mayor of Cambridge.

You would think that at such a time of crisis for his country’s currency, that as a political leader, Meneer Rutte would be grandstanding about the need for financial institutional reform, taking a view about the role of the European Central Bank and, as a politician, he surely wasn’t going to resist having a pop at some of his counterparts?

Not a bit of it. In fact he admitted he wasn’t a fan of huge institutional debates.

Instead he coolly and calmly outlined his roadmap for growth which he summarised as getting public finances in order, taking away hurdles for new business, making government smaller and getting the universities involved as quickly as possible in business life to get development from innovation.

The Dutch leader felt that it was important for him to get in to the thick of what was going on and he couldn’t do that from The Hague. He appeared really pleased to be in the thick of it over here and complimented us by saying the UK’s innovative and creative capability were needed - with 50 per cent of our exports going directly in to the Eurozone, he’s got a point.

According to Meneer Rutte, we have much in common with other non-Euro currency countries such as Sweden, Poland and the Baltic states who are all growth oriented as much as his own country – which, after all, is this region’s closest continental neighbour across the North Sea.

This 44-year old politician is just over a year in to a role which has no limit to its term in office and based on the interview, he sounds like a person with whom we’d all like to do business.


Will Mooney MRICS
Partner

Commercial, Cambridge

Monday 5 December 2011

Investing in the Future of Your Farm

Last week saw the second of two seminars here in the West Country, run by Old Mill accountants based in Shepton Mallet and Carter Jonas, a national property consultancy based locally in Wells and Bath. Both seminars were sponsored by the Agricultural Mortgage Corporation (AMC) and supported locally by the Royal Bath and West of England Society who also hosted the first event at the Showground.The seminars were entitled “Investing in the Future of Your Farm” and both attracted over 100 farmers which only goes to show how eager they were to hear what the speakers had to say, or perhaps the free supper afterwards was also a bit of a draw! But whatever the motivation for attending I don’t think many left disappointed.

Kit Harding, Partner at Carter Jonas opened the meetings with a talk on the market for agricultural land which, unlike the residential property market remains extremely strong, being driven largely by scarcity and increasing farm profitability.

The scarcity factor was brought home particularly starkly by one slide that showed the area of farmland sold annually has fallen steadily since the war and at about 120,000 acres being predicted for 2011, this is little more than 10% of what was sold in the late 1940s. Thus it is no wonder prices have risen, especially in these uncertain times when anyone with cash is looking for a secure investment and farmland seems to fit that description.

Further, farmland makes an attractive investment because it can attract 100% inheritance tax relief which is one of the reasons why farmers when they retire, tend not to sell their land preferring to retain it and let it out. This contributes to the scarcity of supply which is made worse by the very obvious point that “they are not making any more of it”.

Jonathon Day, new regional manager for the AMC in the South West chaired one of the meetings and said there was cautious optimism in the farming industry. He commented, "Commodity prices are the best for a while and it has been a record summer for investment and although CAP reform is on the horizon there is some reason for confidence".

Farmers intending to stay in the industry for the long haul also heard from other specialists, Pat Tomlinson, associate director at Old Mill, and Mike Butler, head of rural services at Old Mill both of whom gave excellent speeches.

Pat, who was until recently head of the agricultural team at HSBC gave an excellent insight in to the banking sector and explained the importance of presenting one’s case to the banks very carefully because although they have money to lend they are looking at all applications for loans very carefully.

Mike then went on to examine various taxation issues and in particular the advantages of a corporate structure as compared to being a sole trader or partnership where one cannot take advantage of the comparatively low rates of corporation tax.

All in all it seems the attendees left satisfied, having both food for thought and food for the stomach.

James Stephen MRICS FAAV
Partner
Rural Practice Chartered Surveyor, Wells

T: 01749 683381
E: james.stephen@carterjonas.co.uk

Friday 2 December 2011

George Osborne’s Autumn Statement

There is some good news and some bad news for the property industry in George Osborne’s Autumn Statement delivered to the House today. Another £5 billion of infrastructure funding on top of the £1.3 billion already promised, and a possible further £20 billion of funds from UK Pension Funds will certainly provide a boost to the economy not only from the work they generate, but also from the increased accessibility that will result for the regions which benefit. Couple that with the intention to make planning appeals faster and more transparent and we might actually get to see some of these projects starting on the ground. The rural Growth Networks and the already announced Growing Places Fund of £500 million will also help to deliver new much needed housing. Enterprise Zones have worked in the past and should help to stimulate growth but only if businesses are strong enough to take advantage of the opportunities.

Not such good news though is the end of the stamp duty concession for first time buyers. Whilst Osborne is convinced that the concession did not have much effect, it certainly did ease the path for those buyers who were in a position to enter the market and it remains to be seen whether the Government mortgage guarantee scheme to enable buyers of new homes to get a 95% mortgage will be any more effective. And somewhat pie in the sky is the Government’s affirmation that it will support new locally-planned large scale developments ‘which have clear local support’. The abolition of the Regional Spatial Strategies has removed what was a convenient policy for local and national politicians in favour of development to hide behind should vociferous parts of their electorate oppose development. Now they have no option but to listen to those voices – and that coupled with the Coalition’s slavish adherence to the Green Belt, much of which was set out in the 1940’s and ‘50’s and now totally anomalous, is not going to make development any easier.

The Chancellor has a difficult tightrope to walk, to provide what stimulus he can to our struggling economy on the one hand, whilst continuing to reassure our funding partners that we are serious about tackling the deficit. He has probably succeeded in that aim but it is still going to leave us with a challenging 2012 and beyond.

Chris Haworth
Head of Commercial Division

Commercial, Cambridge
T: 0207 016 0729
E: chris.haworth@carterjonas.co.uk